7,271 – 520,000 – 11,000,000

In my newsletter at the start of June I cautioned that as lockdowns were eased globally the following weeks would tell a lot in terms of ongoing infection figures. As the World enters its sixth month of Covid-19, the numbers above represent respectively the daily number of infected in the US, the number of certified global deaths and the number of global infections as at Friday 3rd July. Even then, it’s very probable that serious undercounts are happening given how few people are being tested in places like Brazil and Mexico, the latest global epicentres.

Friday’s US daily record was the seventh reported high in nine days as the rate of new coronavirus cases has risen in nearly 40 states. Most normal public Fourth of July celebrations across the United States were cancelled or scaled back due to the anxiety of even more growth in infections.

In case you have forgotten, the reason for the global lockdowns was to remove or at least minimise the strain on national health systems. Texas, the second-most populous U.S. state and which is among the most conservative and Republican States in the US has now implemented the use of face masks, something which is anathema to their State Governor. This became necessary after its intensive-care wards are pushed to full capacity resulting in the use of children’s  hospitals as overflow treatment centres. Anthony Fauci, one of the lead members of the Trump Administration’s White House Coronavirus Task Force, has said the U.S. is in a serious situation over “very disturbing spikes.”

As time has moved on, global politics has wrestled with the trade-off between deaths and the possible extent of each individual nation’s recession. There is no certainty that the various permutations conjured up by different governments will produce a winning formula such is the randomness of infection and the response of each country’s citizens. There is no part of the World that is immune from a second wave with outbreaks in China, Japan, Australia and even Germany occurring where it was felt that the virus had been overcome. Success in overcoming such resurgence depends on the discipline of the local population as well as excellent track and trace procedures that are assisted by those that could be infected. And even then, that’s not enough. In the last week in New York subpoenas were necessary to elicit relevant information from those that refused to cooperate with governmental track and trace directives.

But There’s Bound To Be A Vaccine Soon, Isn’t There?

Around the world it is estimated there are at least 150 scientific groupings working on developing a vaccine with the prize for many being the financial gain that will follow, even though some pharmaceutical companies have publicly stated that they would not wish to make an inordinate profit from the crisis at this point in time.

Assuming that a vaccine will be developed, and there are many possible contenders at the moment in human trials, it will still take considerable time to produce sufficient quantities to inoculate the global population and even more time to immunise a nation. Even then there is an assumption that there will be an international fairness to the vaccine distribution. Judging by the US’ Health department recent purchase of all the next three months’ projected production in of all of the stock of Gilead’s Covid-19 treatment “Remdesivir”, which has been shown to cut recovery times, such empathy towards other countries predicament may not exist at all.

And then, of course, there’s the decision about who should first receive the treatment. Apart from which country might make proprietary claims, the question will arise as to which group of citizens within each country will be vaccinated first. Health workers or the elderly, workers or unemployed? The list goes on.

Why Talk About The US Rather Than Ireland?

From a financial perspective, what happens in the US has a substantial influence on economies and stockmarkets around the world. The US itself is the largest global economy albeit that China is catching up quickly. In addition, depending on the date of valuation, the US accounts for between 54% and 60% of the value of global stock markets. The metaphor of the US sneezing and the rest of the world catching a financial cold is somewhat apt at this point in time.

Notwithstanding all of the uncertainty surrounding Covid-19, stockmarkets have defied any semblance of sense as they have made upward movements. As measured by the MSCI World Index (measured in Euro), markets finished the first 6 months around 5% down and 13% off the high of mid February.

Interestingly, when one compares the forward profit margins of companies in the S&P 500 (the index that measures the stock performance of 500 large companies listed on stock exchanges in the US) and the index performance itself it would appear that the S&P is over valued by 30%, at least at this point in time. In February, before Covid-19 impacted markets there were serious concerns that the market was overvalued by almost 10% at that time.

In April the economic discussion was about a “V” recovery as it was expected that the impact of the virus would only impact the global economy for a few months. Thoughts at this stage are now turning to at least a second, if not a third, quarter of economic disruption and a possible “U” or “W” shaped economic recovery. This carries a serious risk of falls in markets over the summer period.

This has not been helped by misclassifying currently out-of-work Americans as still employed and led to the skewing of the jobless rate. The claims of those who remain jobless point to extended economic weakness with layoffs remaining high. Clarity is needed on this data and only the coming months will provide it.

What To Do Next?

There is no doubt that matters are very uncertain right now and yet we know that time, not timing is what wins out with investment for the long term. Nothing leads me to think any differently now. In my experience most people invest or save through their pension fund to build up capital for when they stop working so that they have enough resources to see themselves out on the far side.

There will most likely be considerable volatility in the coming months when, as before, there will be “bad days” of market pricing. Over the longer term, these “bad days” will get reversed and forgotten about but in the meantime there will most likely be moments of opportunity to buy at a lower price albeit a temporary lower price.